Canadian Dollar Value

Unlike other currencies in the Bretton Woods system, whose values were fixed, the Canadian dollar was allowed to float from 1950 to 1962. Between 1952 to 1960, the Canadian dollar traded at a slight premium over the U.S. dollar, reaching a high of US$1.0614 on August 20, 1957.

The Canadian dollar fell considerably after 1960, and this contributed to Prime Minister John Diefenbaker's defeat in the 1963 election. The Canadian dollar returned to a fixed exchange rate regime in 1962 when its value was set at US$0.925, where it remained until 1970.

As an inflation-fighting measure, the Canadian dollar was allowed to float in 1970. Its value appreciated and it was worth more than the U.S. dollar for part of the 1970s. The high point was on April 25, 1974, when it reached US$1.0443.

The Canadian dollar fell in value against its American counterpart during the technological boom of the 1990s that was centred on the United States, and was traded for as little as 61.79¢ U.S. on 21 January 2002, which was an all-time low. Since then, its value against all major currencies has risen due, in part, to high prices for commodities (especially oil) that Canada exports.

The CAD's value against the U.S. dollar rose sharply in 2007 due to the continued strength of the Canadian economy and the U.S. currency's weakness on world markets. During trading on September 20, 2007 it met the U.S. greenback at parity for the first time since November 25,1976.

Inflation in the value of the Canadian dollar was fairly low since the 1990s, but had been severe for some decades before that. In 2007 the Canadian dollar rebounded remarkably, soaring 23% in value.

On September 28, 2007, the Canadian dollar closed above the U.S. dollar for the first time in 30 years, at US$1.0052. On November 7,2007, it hit US$1.1024 during trading, a modern-day high after China announced it would diversify its US$1.43 trillion foreign exchange reserve away from the U.S. dollar. By November 30, however, the Canadian dollar was once again at par with the U.S. dollar, and on December 4, the dollar had retreated back to US$0.98, through a cut in interest rates made by the Bank of Canada due to concerns about exports to the U.S. (The dollar has been as high as US$2.78, reached on 11 July 1864 after the United States had temporarily abandoned the gold standard.)

Due to its soaring value and new record highs, the Canadian dollar was named the Canadian Newsmaker of the Year for 2007 by the Canadian edition of Time magazine.

Since 84.2% of Canada's exports go to the U.S., and 56.7% of imports into Canada come from the U.S., Canadians are mainly interested in the value of their currency against the U.S. dollar. Although domestic concerns arise when the dollar trades much lower than its U.S. counterpart, there is also concern among exporters when the dollar appreciates quickly. The rapid rise in the value of the dollar increases the price of Canadian exports to the U.S. On the other hand, there are advantages to a rising dollar, in that it is cheaper for Canadian industries to purchase foreign material and businesses.

The Bank of Canada has no specific target value for the Canadian dollar and has not intervened in foreign exchange markets since 1998. The Bank's official position is that market conditions should determine the worth of the Canadian dollar, although the BoC occasionally makes minor attempts to influence its value. On October 20, 2009 (during the 2009 financial crisis) the BoC, claiming the recent rising value of the dollar (which had reached a high of 97.15 cents USD) would "fully offset the favourable developments" of the federal government's stimulus package, announced they would continue the interest rate at the historic low of 0.25 percent. Within minutes, the value fell one cent against the US dollar and went as low as 2.17 cents.

On world markets, the Canadian dollar historically tended to move in tandem with the U.S. dollar.^{[citation needed]} An apparently rising Canadian dollar (against the U.S. dollar) was decreasing against other international currencies; however, during the rise of the Canadian dollar since 2002, it has gained value against the U.S. dollar as well as other international currencies.